Let's face it--monetizing a mobile app is no longer just about the download, it's about user engagement.
According to data we've uncovered, for each additional app a user installs, the average number of sessions per app decreases by an average of 18.8 percent when measured over just 10 installed apps, and the average number of sessions per app for that user decreases by a total of 85.2 percent. When a user has 20 apps installed, the total decrease in the average number of sessions per app grows to an alarming 94.2 percent. If you're a mobile app developer, you could be struggling to capture a share of those sessions.
App developers and marketers need to focus on engagement. While downloads may increase the overall pool of users, what's needed is to identify and cultivate pools of engaged users who will actually drive revenue for your apps.
We've identified 5 key engagement metrics that every app developer and marketer should be using. Here is a brief summary of each of the metrics.
Metric #1: Loyalty: DAUs and MAUs
Daily Active Users / Monthly Active Users (DAUs/MAUs) is a basic measure of "loyalty." The DAU/MAU ratio shows approximately how many days per month a monthly active user engaged with an app. For instance, a DAU/MAU of 10 percent would mean that the average user uses an app the ratio of 3 out of 30 days that month.
Track DAUs/MAUs to gain a basic understanding of your users' engagement. Then, use this number as a benchmark when comparing your app to similar apps.
Metric #2: Retention and Churn
Retention is the measure of a user's repeat app sessions over time and is typically measured on a monthly basis. Churn is essentially the flip side of retention--the percentage of new users that are not retained over time. Churn rates are almost always larger than retention rates. Obviously, if a user is not coming back, there can be no engagement and no corresponding monetization.
To see the complete picture for retention, use cohort analysis to monitor retention and churn. A cohort is a group of users that has completed a particular action for the first time within a specific time frame. For retention purposes, take the first launch of the app on a given day or week (all users who do this are in the cohort) and then track subsequent app opens over time as the retention indicator.
The resulting analysis is shown in a heat-mapped report. It's simple to identify what percentage of each cohort is coming back to the app, week-after-week. You can also use this retention cohort to determine how changes you make in your app affect your users' retention.
Metric #3: Engagement Index
According to recent Apsalar data, on average, 80 percent of the top 20 percent most engaged users of an app have made at least one in-app purchase. As a result, it's important for app developers and marketers to measure and optimize for engagement in order to increase revenue.
To define and measure engagement, think about the goals your users should achieve in your apps. These might include taking a tutorial, rating your app in the app store, completing a level, sharing with a friend, or spending money in the app.
Using an Engagement Index, available to you with Apsalar's free analytics tool, you can define what to tag as an engagement event and how much weight / value you want to place on each.
One way to think about engagement goals is by way of funnel analysis, with the goal being the last step in the funnel and the preceding steps being relative to the goal. The goal will have a higher associated value on the Engagement Index, and each of the preceding steps will have lower values.
Once engagement events are assigned values, the marketer should track overall engagement, as well as Average Engagement Per User (AEPU). Using an Engagement Index-based cohort analysis, the marketer can also measure how changes in an app impact user engagement.
Metric #4: Lifetime Value
A user's Lifetime Value (LTV) is defined as the total revenue that the user generates within your apps while active. For instance, if a user spends $10 in your app over 12 months, then that user's LTV is $10.
In addition to tracking total revenue and ARPU, you can use cohort analysis to measure how changes in your app affect your users' lifetime value. In this case, the cohort event is the first use of the app in a given week [x], and the indicator is purchases over the following [y] weeks.
Once you've cohorted your users this way, you can then do further segmentation based on acquisition source, geography, platform, and user behaviors to compare LTV across different user groups. By doing so, you can determine which groups are of the highest value within your apps.
Additionally, set up monetization funnels in your apps to track revenue goals, such as in-app purchases or premium upgrades. Monitor conversion ratios to see whether they are increasing.
Metric #5: User Acquisition ROI
As an app marketer, you're faced with the daunting challenge of app discovery. When you spend on advertising to drive more consumers to install your apps, you'll want to know how much user spend each of your acquisition sources bring in, so that you can optimize your user acquisition budget accordingly.
Using a campaign attribution analysis tool, such as Campaign Source Insights from Apsalar, you can use a universal tracking link to pass information on users from any and all mobile web and app campaigns. A good campaign attribution report will allow you to view the total downstream revenue generated from the users coming from each campaign. By using this report in conjunction with cohort analysis, you can also gain further insights and see the lifetime value of the users coming in from each source.
Using these 5 important engagement metrics, any app developer or marketer should be able to gain significant insights to help shape key business decisions and increase revenue.
Want to learn about actionable next steps that you can take to boost each of these metrics once you've started tracking them? Download our e-book here.
As Director of Marketing for Apsalar, Sarah is responsible for leading the company's marketing strategy and programs and is a strong advocate for taking a data-driven approach to marketing. Previously, she spent several years at Google, where data is undisputedly a way of life, and was most recently a Senior Manager at PubMatic, a leading player in the online and mobile advertising space. Sarah is a graduate of Stanford University, where she studied Economics and Psychology.